Second-quarter earnings at Goldman Sachs have been almost cut in half after the bank set aside $1.45bn (£930m) for legal costs connected with the potential mis-selling of mortgage bonds.
The New York-based financial giant reported net income of $1.05bn (£670m) – down from $2.04bn (£1.3bn) for the same period last year – as it continues talks with the US Department of Justice over a possible settlement.
Without the cash set aside for the mortgage problem, an issue which has also beset many of its competitors, Goldman would have easily beaten analysts’ expectations with an earnings per share over the three-month period of $4.75.
“We are pleased with our performance for the quarter,” said Lloyd C Blankfein, the company’s chairman and chief executive. “While uncertainty in the EU weighed on investors’ level of conviction, many of our businesses continued to benefit from generally improving economic conditions and healthy client activity.”
Shares in Goldman rose slightly to $212.96 in New York in early trading after the figures were announced helping the company to consolidate a near 10% rise in its stock price this year.
Goldman said its investment banking arm produced net revenues of $2.02bn, 13% higher than the second quarter of 2014 and 6% up on the first three months of this year.
The investment management division reported net revenues of $1.65bn (£1bn), its second highest quarterly performance. It now boasts that assets under its supervision are at record levels. Revenue from Goldman’s trading division was $3.6bn (£2.3bn) in the quarter, down 6% from $3.83bn (£2.5bn) in the same period a year ago.
Goldman said it had paid out $3.81bn over the quarter in pay and benefits including salaries and bonuses.
Bankers at Goldman were paid an average of $373,265 (£245,500) in 2014 after profits at the highest profile firm on Wall Street rose 5%. The company now has just under 35,000 staff worldwide, roughly 2,500 more than this time last year.
There has been mounting speculation that the bank is homing in on a final settlement over the alleged mortgage mis-selling in the run up to the financial crisis that could be as high as $3bn in total. Goldman had already set aside almost $1bn over the last 18 months.
